Time for adult supervision at Domo?
- Summary:
- What's going on with Domo. We don't know for sure but field inquiries paint a different picture from that in the popular media. We talk to customers and others to get a better sense of what Domo means for the future of enterprise software landscapes.
We've been trying to get beneath the surface at Domo for some time but without much success. Why? This vendor is making some pretty wild statements about what it wants to be in enterprise land but our field tests and sources suggest something quite different when it comes to the realité. Why does this matter now?
Yesterday, the company was reported upon by the usual Silicon Valley suspects of VentureBeat, BusinessInsider, Forbes and re/code. Not one of them asked questions that anyone with a modicum of enterprise savvy would have missed. This is worrying and my somewhat cynical take is that this otherwise media shy company is excellent at one thing: marketing. They know how to spin a magical story that spellbinds the listener and for that I give them enormous credit. It also means the recipients of such tales of fantasy are often thrown off the scent of the story they should be following. Those stories were followed up by one of the most breathtaking pieces of myopic 'journalism' I've seen from TechCrunch in quite a while. Let's break this down, starting with Forbes, which did a better job than most but still provides misleading information. Here goes:
At the company’s annual event in Utah called Domopalooza, [Josh] James [CEO] and Domo announced a new mobile-based app store and “business cloud” and $130 million in additional funding that maintains its valuation at $2 billion. As part of its app push, Domo said it has 1,000 partnered business apps in its new app store, while making its original core business free for most users. Domo’s even setting up its own investment fund to put $50 million into supporting its new ecosystem.
“We’ve been working five years for this, to create the world’s first business cloud,” says James, who founded Domo in 2010.
Lemmein!
The moment I saw that I thought - "Whoopee do, I gotta try this out." But no, you can't unless you are a customer. Here is how it works in process flow terms. Now - color me stupid if you want but how is this free or freemium? More to the point, why am I being dragged into what is almost certainly a sales demo if all I want to do is look to see what might be in the AppStore? I can do that if I'm a Salesforce or SAP prospect so why do I have to jump through hoops for Domo?
I already know the answer because I've tried this in the past. Filling in the form is Domo's way of assuming you can take a random sales call. So where's the 'original core business free' bit? And how can I possibly know if I would be vaguely interested without having some indication of what's behind the storefront? It's a bit like those blacked out shopfront things that scream SALE! but you can't see a thing until you get in the store, fearful you'll be pounced upon by a sales assistant. Forbes explains it this way:
As part of the new focus for Domo, the company has made its product suite in use before Tuesday free to customers. Bigger businesses that want administrative support and oversight will be able to try those tools for 60 days before paying.
Uh - OK, it's not free after all and then only available to an as yet to be defined group of customers. Well - that clears that up then doesn't it? No it doesn't because this is what Forbes is reporting:
Domo doesn’t expect to take a short-term hit to its own revenue from the shift as it will primarily bring in new customers, says James, who adds that Domo’s revenue retention is as high as 200%, meaning customers are spending $2 for every $1 the previous year, a high mark for enterprise software.
This is where things get sticky. Check this out.
Some of James’ pronouncements from a year ago haven’t quite panned out. The $200 million run rate he predicted in 2015? Domo has $100 million in bookings under contract and is growing at a rate of 100%, says James.
So Forbes gives Domo a pass. We undertook our own checks and this is what we discovered:
Check and balances
Domo's presence at Glassdoor reports revenue of $10-25 million range. That's likely out of date but a $200 million run rate doesn't mean anything. It could be order book, it could be contracted value, it could be anything. But in order to get to that figure, every one of its customers would have to be paying an average of at least $100,000 each. That may not be as far fetched as it sounds although that seems highly improbable to me. Why? Domo is positioned as a business cloud but in reality it is a very snazzy looking visualization tool that has some data acquisition capability.
The company talks about Tableau customers 'coming over in droves' which I don't believe for one minute. More likely is that Domo has snagged a good number of departmental buyers who either have nothing to assist in operational performance management or, are looking Domo and thinking that for $100-300,000, they can get from underneath the burden of paying SAP and/or Oracle maintenance costs for tools like BOBJ or Hyperion. That will be very attractive and a clear opportunity to land and expand, just like Tableau and Qlik do. In fact it is the only way Domo can reach those enterprise customers because regardless of hype, there is no single source of operational truth anywhere on the planet so coming with this kind of story plus a massive App Store has huge sex appeal.
As an aside, if SAP and Oracle are not taking notice of this then they should. History tells us very clearly that the company which out markets another wins. Its the old VHS v Betamax argument repurposed for hard pressed marketing departments.
What we do know from customer inquiries is that Domo is extremely attractive on the outside but with very little depth. One described it as akin to a Chinese banquet; gorgeous to look at, delicious to sample, but one fart and its gone
Regardless of what Domo says, it is not possible to simply snap in applications that are going to provide as claimed 'end to end' data visibility except in very narrowly defined circumstances and with near vanilla database configurations. The almost infinite database configurations let alone customizations means that you are going to be on the hook for a minimum three to six months of data table matching. This was confirmed for multiple customer inquiries. And, in case anyone needs reminding, there's a reason why Appirio (among others), has a large integration business based upon Salesforce, Workday and Google.
But - the upside for Domo is that it can easily get customers to drop $30-50,000, especially given that it's highly aggressive sales people are mostly young and enthusiastic with a clear passion for what they're being told to sell. It gets much harder once IT gets involved for a variety of reasons, not least the fact that Domo's use of AWS doesn't come with governance assurance as we understand the term. From what we've been told, customers understand their data is co-mingled in the Amazon cloud. That's OK provided the data isn't business critical and again, from what we know, that's the case because right now Domo is shying away from taking on applications where there is a significant need to acquire financial data. Co-mingling financial data is an absolute no-no in enterprise land.
For the record, this is not the first time I've been provided with this general sense of what is happening in the field. I heard much the same last fall. More telling, other sources tell me that Domo actively discourages knowledgable media from getting close, let alone asking the questions that really matter. Late last year, one colleague was told to remove himself from a show stand or be faced with being escorted off the ground by security. Sound fishy to you?
For myself, I challenge Domo to explain how any service can credibly be called a 'business cloud' that manages everything you need without access to the financial information. It just isn't possible. Or at least I have never seen it in over 40 years of IT consulting, analysis and commenting around hundreds of systems. Moving on...
We lied
The most shocking thing for me though was that in many reports, James was quoted as saying something along the lines reported by re/code:
“We’ve been lying about the opportunity we see ahead of us,” James said in an interview. “We’re going after a lot more than anyone may have realized.”
The plan, he described, is to create a cloud-based environment from which a company can run its operations, soup to nuts, including finance, sales, marketing and operations. The software grabs live data from all the different places it may be found and creates visual representations based on the user’s role in the company. After furtively guarding it behind non-disclosure agreements for months, Domo will open the apps up to prospective customers to try for free.
It is hard to know where to start with this one. If Domo has any pretensions of doing an IPO then they will have to clean this up. I've already mentioned the bait and switch for new customers (see graphic to the side) but to admit to lying is downright stupid and a huge red flag. Couple that with no accurate confirmation of actual revenue or run rate and you have to ask - what can we honestly believe? Without unequivocal statements, the answer is 'nothing of substance.' This is not a case of youthful jocularity but about confidence in a responsible management team. That's a primary requirement of public markets where the ability to get caught in class actions is never far away. What is more shocking is that none of the publications that chose to print interviews bothered to take up this topic. And now we come to the prize piece.
Buzzsaw
TechCrunch. It said: Domo takes on Slack with $131 million at $2 billion+ valuation. Are you kidding me and if not then what does this say about Domo's real market?
It turns out that the 'free' bit I was drawn into thinking about is really Domo Buzz, a collaboration tool for which there is a waitlist. The list of capabilities is impressive (see image left) but if TechCrunch thinks that this is a Slack killer then it must also think that Domo is only going after the SMB market. Given Domo's normal price tag which is said to start at $25-30,000 pa, that's not going to wash. At least not today.On the other hand, including a slew of collaboration capabilities at the center of what it offers is attractive.
I have been saying since forever that 'content without context in process is futile.' Putting a communications layer into Buzz goes a long way to solving that problem, provided the process steps are there in the first place. I doubt very much that will be the case although it may well be possible to build out processes that effectively stitch apps together via the communications platform. Zapier already provides most of that capability and while not free, is well within range for many SMBs.
It is also possible that Domo is thinking about services that don't necessarily need a lot of process manipulation but which have APIs from which it can readily integrate the required data. I can think of many marketing and sales tools along with social apps into which this might well fit.
The far greater challenge comes in ensuring that business implements Buzz correctly so that it doesn't fall into the trap that Slack fell into of inadvertently creating the mother of all water coolers. I'd like to see more of what that has to offer before passing judgment but on this one, I get the sense that Domo is on the right path. This is what they said in the press release:
[Buzz is] an entirely new social collaboration platform for the Business Cloud that weaves business data into the social fabric of your organization to speed insights and drive decisions that improve performance. Buzz is available for free to every employee and every company, including non-Domo customers. A radical upgrade to Domo’s existing collaboration feature and under development for several years, Buzz gives business decision makers one platform to use with co-workers, teams, departments and across organizations. Key features that other solutions charge for, such as user and team administration and unlimited search history, are also free with Buzz.
I like the sound of that but as with so many things Domo related, the lack of any detail is frustrating and what I really need to understand is how this plays out as both an easy to use tool and as a business model. For me, Zapier has largely led the way on ease of use and business model acceptance so if I end up for example forking over $100-300 a month to get a clutch of well integrated solutions then that is my SMB entry point.
My take
Domo is frustrating. Despite the razzamatazz (one person described Domopaloozza as akin to a non-stop party night on Ibiza) the depth of whatever is behind its products is fuzzy at best. Another customer described it as being like a Monet painting, beautiful but slightly out of focus. The fact that Domo is super selective in its media approach makes it impossible to properly assess the realité. that may well suit its marketing model but is a whole different story when it comes to making friends with the right people inside the organization.
Perhaps it feels, very much as Salesforce did back in the day that avoiding pesky IT governance wonks is a great strategy but I think those days are behind us. There are far too many questions around cloud usage where we're talking multiple applications for that to wash in the long term.
On the other hand, the idea that Domo could become the hub for hundreds of applications or micro services puts it at the center of an Amazon-esque model that could yet prove extraordinarily attractive, if, for no other reason than it unshackles the enterprise from its dependence upon single suppliers and allows them the freedom to build software landscapes that match need.
The fact that Buzz is mobile focused is exactly the right thing for the 21st century but again, where's the freakin' detail?
I hope that vendors who normally occupy the central ground in the enterprise software landscape are taking notice. But I also hope that the recent investors will inject a sense of discipline that is missing today.